Buyer interest in $1m properties soars
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Feelings are mixed among buyer’s agents when it comes to the property-related measures handed down in this week’s budget, with hits and misses reported across the board.
While buyer’s agents are impressed with some elements of the federal budget, others have been deemed disappointing.
As anticipated, the federal budget didn’t directly address or change existing arrangements around the critical mechanism of negative gearing nor did it touch capital gains tax. What it did do is put an emphasis on first home buyers.
And while Steve Waters, the director of the Right Property Group, sees great merit in the Family Home Guarantee scheme, he has taken issue with the government’s focus on new homes with the reintroduction of the New Home Guarantee.
“I understand the economics behind why they’re concentrating on new homes, because that has a channel effect all the way down to the whitegoods,” Mr Waters said.
“There’s a big portion of the potential home owner that is not going to afford that no matter what the grant is, so I would have liked to have seen existing property fall into these schemes, to some degree part. That would be a lot more attainable for a lot of people,” he added.
InvestorKit’s Arjun Paliwal shared Mr Waters’ sentiments. Although Mr Paliwal isn’t too worried about existing stock being overlooked, he took notice of potential threats to lending quality.
“Continued first home buyer support, assistance and low-deposit loans for the vulnerable are both positive and negative. Positives are that they offer support to the construction industry and help people get into the market.
“The downsides are that they carry a potential risk of deteriorating lending book quality due to the high LVR positions incoming,” Mr Paliwal said.
On the other hand, Mr Waters labelled the Family Home Guarantee “outstanding”, in that the government has finally acknowledged the hardship single parents face in attaining a home.
“It’s an absolutely outstanding initiative. There’s a big portion of single parents, single mothers especially, who have for many years said, ‘I’ve got no chance’. And now they’re essentially going to be underwritten by the government, and I just think that is great. The flow-on effect through their family, through to the next generation, to know that they have that security, I think will pay dividend in the future,” Mr Waters said.
Moving away from the home buyer initiatives, Mr Waters touched on the government’s infrastructure spend. Namely, the Morrison government has pledged an additional $15.2 billion to infrastructure projects over the next 10 years.
“We can be negative about it and say there should have been more in different areas, but the piggy bank is only so full.
“There is no doubt that the flow-on from the infrastructure spend, through certain areas of Australia, will also help construction,” said Mr Waters.
According to the budget, the bulk of the budget spend is going to NSW, where $3.8 billion is being committed to various projects, including the Great Western Highway Upgrade.
But the state due to receive the second largest slice of the infrastructure pie is South Australia, where $3.2 billion has been pledged for various jobs.
“South Australia is in the midst of an accommodation crisis. I think, along with infrastructure, they’re really trying to solve that immediate problem,” Mr Waters said.
But he did identify a problem.
“The problem is with all of the infrastructure announcements and the HomeBuilder and the rest, the majority of them don’t have an immediate effect other than a confidence boost.
“So, there will be a vacuum until we start to see these effects,” Mr Waters said.
Overall, he noted, the budget is clearly the result of COVID and quite safe.
“A lot of the budget hasn’t addressed the problem around the borders and immigration, but it will be circa 2024 before we get any normality in terms of those numbers coming back into Australia, and the void in the meantime is very real.
“There is still a lot of oversupply in that attached dwelling space, there is no real appetite for developers to go out and build units when there has been a monumental swing to the suburbs,” Mr Waters warned.
As such, he believes the federal government will need to step in and push the states to eradicate some of the red tape to boost the number of building projects.
“We need to eradicate some of the red tape in opening up sectors of available building envelopes, so that we can start to address affordability,” Mr Waters concluded.